GERMANY–CHINA From Rivals to Partners

German–Chinese relations have been unsettled in recent months. But with both countries concerned about the new Trump administration, they are seeking to restore good ties.
With the Trump administration changing the constellation of global relations, Germany and China are urgently looking to improve ties.

Shi Mingde, China’s ambassador to Germany, is a hospitable man. Anyone visiting the Chinese embassy in Berlin will be given jasmine tea. And sometimes, Mr. Shi invites prominent figures in German public life to dinner.

On Thursday last week, it was the turn for Sigmar Gabriel, then still the federal economics minster, but who has since become Germany’s foreign minister. By accepting Mr. Shi’s invitation, Mr. Gabriel sent out a clear signal: after difficult months in Chinese-German relations, we are talking again, and we plan to do a lot more together.

It is a significant step, as German–Chinese relations have not had an easy year.

And Mr. Gabriel certainly made his own contributions to problems. The Chinese acquisition of German robot manufacturer Kuka set off an impassioned debate in Germany over how to best protect the country’s cutting-edge technologies from Chinese takeover. Citing security concerns, Mr. Gabriel even helped to block the purchase of plant manufacturer Aixtron by Chinese investors.

Beijing was not happy. During his visit to China in November, Mr. Gabriel was even stood up by trade minister Gao Hucheng. Worries about a new rivalry between the two countries began to circulate.

But now U.S. President Donald Trump is managing to bring the two countries back together by unleashing new threats of import tariffs and talk of protectionism on a daily basis. On Tuesday, Mr. Trump’s envoy on trade started another attack on Germany, claiming that the country was using a “grossly undervalued” euro in order to put its main trading partners under massive pressure.

Trump is shaking everything up. The Chinese have flicked a switch and are now courting the Europeans. E.U. diplomat based in Beijing

Worries about the United States’ unpredictable new course are bringing Germany and China closer.

Last week, Chinese premier Li Keqiang spoke at length with Chancellor Angela Merkel to coordinate the two countries’ strategies. Normally, information about these kinds of conversations does not leak out. But in this case, the telephone call was widely reported by Chinese media, who emphasized the close coordination between the two.

There is much to discuss. In July, Germany will host the annual G20 summit in Hamburg. Meetings of leading industrial and emerging nations usually end with a vague appeal for more free trade—nothing binding, but an important signal. This year, however, even that cliché may fall victim to Mr. Trump’s new broom. Neither Berlin nor Beijing have an interest in this happening. At the G20 meeting in Hangzhou in September of last year, Chinese president Xi Jinping prepared the agenda for more globalization, one which Germany plans to continue.

For its part, Beijing has started a charm offensive. “Europe is our safety anchor,” said Chen Xu, the head of the Europe section of the Chinese foreign ministry. Germany had a key role to play, he told a small group of foreign journalists, after he accompanied the president to the World Economic Forum in Davos, where Mr. Xi gave a vigorous speech in defense of free trade.

“To pursue a protectionist path is like locking oneself into a dark room. Wind and rain are kept outside, but so is light and air,” Mr. Xi warned. He did not mention Mr. Trump by name, but the implicit criticism of the new president’s isolationist policies was clear.

In politics, symbols count for a lot. So it will not have gone unnoticed in Beijing that, a few days after Mr. Xi’s visit to Davos, Ms. Merkel quoted his words in a prominent speech. Both globalization and digitization were making people feel insecure, she said, and many of them “are dreaming of a return to manageable living spaces.” Again, the critique of Mr. Trump was crystal clear. Again, he was not mentioned by name.

So Beijing and Berlin are coming closer. “Trump is shaking everything up. The Chinese have flicked a switch and are now courting the Europeans,” said an E.U. diplomat in the Chinese capital. For years, Germany has been pushing for better access to Chinese markets. Now the Chinese appear to be willing to discuss the subject. Since 2014, Beijing has been negotiating with the European Union over an investment deal. But talks have faltered on the question of market access.

China is one of Germany's most important trade partners, with 5,000 German firms active in China. We want to intensify the collaboration. Official, German Economics Ministry

This could now change. “If China is genuinely ready for more open markets, we could very quickly conclude the trade deal,” said the high-ranking diplomat. A free trade agreement could reinforce the bonds between China and Germany, and even China and Europe. But to achieve this, the Chinese will have to follow words with actions.

Among German diplomats and trade envoys, there is an unmistakable new willingness to focus on opportunities, not risks, in the two countries’ trading relations. “China is one of the most important trade partners that Germany has. There are 5,000 German companies active in China. We want to intensify the collaboration,” said a source in the economics ministry.

Mr. Gabriel set the new tone shortly after Mr. Trump’s inauguration as president. “If one window closes, often another one opens,” he recently told Handelsblatt, alluding to Mr. Trump’s announcement of possible new import tariffs.

However, the shift that the economics ministry has in mind is not just toward China, but all of Asia. Sources in the ministry suggest that they will be keeping a close eye on new opportunities in Asia. Mr. Gabriel’s departure for the foreign ministry will have no impact on that turn in trade policy: Brigitte Zypries, Mr. Gabriel’s successor, takes the same position as he did, said a source.

01 p06 Most Important Trading Partners-01

The economics ministry has also made a significant change of emphasis in how it describes planned reforms to Germany’s foreign trade law, proposed in the wake of last year’s takeover controversies. The plans are not at all directed against China, say ministry sources, but in fact would help fight off any strategic investors whose interests are not purely economic.

“We are discussing solutions on a European level, which will allow us to examine—and if necessary prevent—investments orchestrated or supported by state actors,” said Matthias Machnig, a deputy economics minister. A joint proposal was currently being worked out with Italy and France: “Italy supports our plans. In our talks with France, there are still a number of open questions, which hopefully can be solved,” he added.

In October, Mr. Machnig presented the first proposals for fighting off unwanted investors. They were taken as an affront by the Chinese, overshadowing Mr. Gabriel’s visit to China at the beginning of November.

 

Stephan Scheuer is Handelsblatt's China correspondent, based in Beijing. Klaus Stratmann covers politics and the energy market from Berlin. To contact the authors: [email protected], [email protected]